10-Q: UNG Reports Q3 2025 Loss, NAV Down 23% Amid Volatile Gas Market

United States Natural Gas Fund, LP (UNG) reported a net loss of $55.88 million for Q3 2025, with its Net Asset Value per share decreasing 23.03% for the nine months ended September 30, 2025, amidst a volatile natural gas market.

Summary

• UNG reported a net loss of $55,875,975 for the three months ended September 30, 2025, a decrease from a net income of $1,905,125 for the same period in 2024.
• For the nine months ended September 30, 2025, UNG recorded a net income of $30,524,943, an increase from $11,411,932 for the same period in 2024.
• The Net Asset Value (NAV) per share decreased by 23.03% from $16.85 at December 31, 2024, to $12.97 at September 30, 2025.
• Total assets declined to $650,650,435 at September 30, 2025, from $790,024,428 at December 31, 2024.
• Total liabilities significantly decreased to $26,171,321 at September 30, 2025, from $46,189,005 at December 31, 2024.
• Limited Partners shares outstanding increased to 48,146,103 at September 30, 2025, from 44,146,103 at December 31, 2024.
• The Benchmark Futures Contract price for natural gas decreased approximately 9.08% over the nine months ended September 30, 2025, from $3.633 to $3.303 per MMBtu.
• UNG's actual total return for the nine months ended September 30, 2025, was (23.03)%, outperforming its benchmark by 1.43%.

Sentiment

Score: 4

Explanation: The fund experienced significant declines in NAV and total assets, along with a net loss for the quarter, driven by a decrease in natural gas prices. However, it demonstrated excellent tracking of its benchmark and management anticipates continued outperformance due to interest income exceeding expenses. Legal proceedings are being dismissed or contested. The market context for natural gas is volatile but has potential upside from LNG demand and AI data centers.

Positives

• Net income for the nine months ended September 30, 2025, increased to $30,524,943 from $11,411,932 in the prior year period.
• UNG's actual total return outperformed its benchmark by 1.43% for the nine months ended September 30, 2025, primarily due to interest income exceeding expenses.
• The average daily difference in tracking the Benchmark Futures Contract was 0.010% for the 30-valuation days ended September 30, 2025, indicating performance within the +/10% tracking goal.
• Total liabilities decreased significantly from $46,189,005 at December 31, 2024, to $26,171,321 at September 30, 2025.
• Management anticipates that interest earned by UNG may continue to be greater than fees and expenses, potentially leading to continued benchmark outperformance.
• The U.S. District Court granted the USO defendants' motion to dismiss the Optimum Strategies Action with prejudice on March 15, 2023.
• The Wang Class Action, a putative class action, was voluntarily dismissed on August 4, 2020.

Negatives

• UNG reported a net loss of $55,875,975 for the three months ended September 30, 2025, compared to a net income of $1,905,125 for the same period in 2024.
• Net asset value per share decreased by 23.03% for the nine months ended September 30, 2025, from $16.85 to $12.97.
• Total assets decreased from $790,024,428 at December 31, 2024, to $650,650,435 at September 30, 2025.
• The Benchmark Futures Contract price decreased approximately 9.08% over the nine months ended September 30, 2025.
• Average interest rates earned on short-term investments were lower during the nine months and three months ended September 30, 2025, compared to the same periods in 2024.
• UNG exceeded NYMEX accountability levels for natural gas futures contracts during the nine months ended September 30, 2025, holding a maximum of 16,693 contracts against a 6,000 net contract limit for any one month.

Risks

• Market risk, specifically commodity price risk, from fluctuations in the value of natural gas futures contracts and other derivatives.
• Credit risk due to the potential failure of counterparties (clearinghouses, FCMs, or OTC swap counterparties) to meet their obligations.
• Illiquidity risk for investments in Natural Gas Interests due to market conditions, regulatory considerations, or daily price limits on exchanges.
• Impact of contango and backwardation, natural market forces that can cause the fund's returns to differ from a direct investment in natural gas.
• Regulatory limitations, including accountability levels, position limits, and price fluctuation limits imposed by DCMs (NYMEX, ICE Futures) and the CFTC, which could hinder UNG's investment strategy.
• Interest rate risk, where changes in interest rates can cause fixed income securities and other investments to fluctuate in value, potentially leading to losses.
• Inflation risk, as increasing inflation can erode the value of UNG's cash and Treasury investments.
• Money market fund risk, as there is no guarantee that government money market funds will preserve the value of an investment at $1.00 per share, potentially leading to losses.
• Geopolitical and natural disaster risks, including pandemics (e.g., COVID-19), wars (e.g., Russia-Ukraine), sanctions, trade barriers, recessions, and terrorism, which can negatively impact commodity prices and investment values.
• OTC contract risk, where each party to an OTC swap bears the credit risk of the other, and valuing these derivatives is less certain than exchange-traded instruments, potentially increasing liquidity risk.
• Tracking error, which can arise from buying/selling contracts at prices other than closing settlement, expenses exceeding income, or holding Other Natural Gas-Related Investments that do not closely track the benchmark.
• Risk of loss due to the insolvency of UNG's custodian or Futures Commission Merchants (FCMs), as cash and other property deposited with FCMs are commingled with customer funds.

Future Outlook

Management anticipates that interest rates may continue to stagnate over the near future, and that fees and expenses paid by UNG may continue to be lower than interest earned, potentially leading to UNG outperforming its benchmark. The increasing demand for LNG and new export facilities, along with potential new demand for natural gas to power AI data centers, are expected to lift natural gas prices. While domestic supply and demand will likely remain the dominant influence on prices in the long term, international demand and extraordinary international events will have a growing influence on price volatility and direction. A potential resolution to the Russia-Ukraine war could bring more Russian natural gas supply back online to Europe, easing international price pressure and potentially having a milder effect on U.S. prices.

Management Comments

• "USCF believes that market arbitrage opportunities will cause daily changes in UNG's share price on the NYSE Arca on a percentage basis to closely track daily changes in UNG's per share NAV on a percentage basis."
• "USCF further believes that the daily changes in prices of the Benchmark Futures Contract have historically tracked the daily changes in the spot price of natural gas."
• "USCF believes that the net effect of these relationships will be that the daily changes in the price of UNG's shares on the NYSE Arca on a percentage basis, plus interest earned on UNG's collateral holdings, less UNG's expenses."
• "USCF believes that it is not practical to manage the portfolio to achieve such an investment goal when investing in Futures Contracts and Other Natural Gas-Related Investments." (Referring to NAV or market price equaling spot price or tracking over periods greater than one day).
• "USCF anticipates that interest rates may continue to stagnate over the near future. It is anticipated that fees and expenses paid by UNG may continue to be lower than interest earned by UNG. As such, USCF anticipates that UNG could possibly outperform its benchmark so long as interest earned is is greater than the fees and expenses paid by UNG."
• "USCF believes that natural gas has historically not demonstrated a strong correlation with equities or bonds over long periods of time. However, USCF also believes that in the future it is possible that natural gas could have long-term correlation results that indicate prices of natural gas more closely track the movements of equities or bonds."
• "USCF, USO, and the individual defendants intend to continue vigorously contesting any such claims." (Regarding In re: United States Oil Fund, LP Securities Litigation and In re United States Oil Fund, LP Derivative Litigation).

Industry Context

The natural gas market experienced significant volatility during the nine months ended September 30, 2025, with the Benchmark Futures Contract price decreasing by 9.08%. Natural gas production capacity is expanding, evidenced by an increase in rig counts from 103 to 117. While domestic demand and U.S. exports have grown, U.S. production has also kept pace. A cold winter in the U.S. led to substantial draws on inventories, temporarily boosting prices. Future price increases are anticipated due to rising demand for Liquefied Natural Gas (LNG), new export facilities under construction, and potential new demand from AI data centers. The Russia-Ukraine war has profoundly altered European natural gas supply dynamics, leading to reduced Russian supply and increased international demand for U.S. LNG, which continues to influence U.S. natural gas prices and volatility. The Federal Reserve's interest rate policies, aimed at managing inflation, also impact the broader economic environment relevant to commodity markets.

Comparison to Industry Standards

• UNG's investment objective is to track the daily percentage changes in the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the Benchmark Futures Contract, plus interest earned on collateral holdings, less expenses.
• UNG aims for its average daily percentage change in NAV over any 30 successive valuation days to be within plus/minus ten percent (10%) of the average daily percentage change in the Benchmark Futures Contract. For the 30-valuation days ended September 30, 2025, UNG's NAV tracked within this goal, with an average daily difference of 0.010%.
• Since its inception on April 18, 2007, to September 30, 2025, UNG's average daily change in NAV closely tracked the Benchmark Futures Contract, with an average daily difference of (0.000)%.
• For the nine months ended September 30, 2025, UNG's actual total return of (23.03)% outperformed the expected total return based on the Benchmark Futures Contract of (24.45)% by 1.43%, primarily due to interest and dividend income exceeding expenses.
• The natural gas market experienced both contango and backwardation during the period, which are natural market forces that can cause the total return on an investment in UNG's shares to differ from a hypothetical direct investment in natural gas.
• Correlation analysis over ten years (September 30, 2015, to September 30, 2025) shows natural gas prices had low correlation with Large Cap US Equities (S&P 500) at 0.097 and US Government Bonds (BEUSG4 Index) at -0.135, suggesting potential diversification benefits. Over the past year, these correlations were 0.058 and 0.323, respectively. Correlations with other energy commodities like Crude Oil, Heating Oil, and Unleaded Gasoline were also generally low, particularly over the one-year period.

Corporate Governance

Legal Proceedings

• **Optimum Strategies Action**: USO and USCF were defendants in an action alleging violations of the Securities Exchange Act of 1934 and Connecticut Uniform Securities Act. The court granted the USO defendants' motion to dismiss the complaint with prejudice on March 15, 2023, and declined supplemental jurisdiction over the state law claim. No notice of appeal was filed.
• **Settlement of SEC and CFTC Investigations**: On November 8, 2021, USCF and USO resolved investigations with the SEC and CFTC. The SEC found violations of Section 17(a)(3) of the 1933 Act, and the CFTC found violations of Section 4o(1)(B) of the CEA and CFTC Regulation 4.41(a)(2). Civil monetary penalties totaling $2,500,000 were paid ($1,250,000 to each agency).
• **In re: United States Oil Fund, LP Securities Litigation**: A consolidated putative class action against USCF, USO, and others, alleging violations of the 1933 Act and Exchange Act related to disclosures during extraordinary market conditions in 2020. On September 29, 2025, the Court granted the defendants' motion to dismiss the complaint in its entirety without prejudice, allowing the plaintiff to amend by November 26, 2025. Defendants intend to vigorously contest claims.
• **Wang Class Action**: A putative class action against USO, USCF, and others, alleging federal securities claims under the 1933 Act. Voluntarily dismissed on August 4, 2020.
• **Mehan Action**: A derivative action on behalf of USO against USCF and others, alleging breach of fiduciary duties and failure to act in good faith. Proceedings are stayed pending final disposition of motions to dismiss in In re: United States Oil Fund, LP Securities Litigation. Defendants intend to vigorously contest claims.
• **In re United States Oil Fund, LP Derivative Litigation**: Consolidated derivative actions on behalf of USO against USCF and others, alleging violations of the Exchange Act and common law claims. Proceedings are stayed pending final disposition of motions to dismiss in In re: United States Oil Fund, LP Securities Litigation. Defendants intend to vigorously contest claims.

Related Party Transactions

• **USCF Management Fee**: UNG pays USCF a monthly fee equal to 0.60% per annum of average daily total net assets of $1,000,000,000 or less, and 0.50% for assets greater than $1,000,000,000.
• **Marketing Agent Agreement**: USCF pays the Marketing Agent (ALPS Distributors, Inc.) a fee of 0.025% of UNG's total net assets, commencing October 1, 2022.
• **Custody, Transfer Agency, and Fund Administration and Accounting Services Agreements**: USCF pays BNY Mellon for these services for UNG and the Related Public Funds.
• **NYMEX Licensing Agreement**: UNG and certain Related Public Funds pay NYMEX a licensing fee equal to 0.015% on all net assets for using settlement prices and service marks.
• **Independent Directors and Officers Expenses**: UNG pays its pro rata portion of directors and officers liability insurance and fees/expenses of independent directors who serve as audit committee members for UNG and the Related Public Funds. Estimated total for UNG for 2025 is $260,000.

Stakeholder Impact

• **Shareholders**: Experienced a 23.03% decrease in NAV per share for the nine months ended September 30, 2025. Potential for future outperformance if interest income continues to exceed expenses. Subject to market volatility, contango/backwardation, and regulatory risks inherent in commodity investments.
• **Authorized Participants**: Pay a $1,000 transaction fee for each Creation or Redemption Basket order.
• **USCF (General Partner)**: Receives management fees based on UNG's net assets and is responsible for managing UNG's assets and paying certain operational fees (Marketing Agent, BNY Mellon).
• **FCMs (RBC, Marex North America, Marex Capital Markets, Macquarie Futures USA, ADMIS)**: Receive brokerage commissions of approximately $7 to $8 per round-turn trade.
• **OTC Swap Counterparties (Macquarie Bank, Société Générale, Scotia Bank)**: Receive a flat fee between 0.20% and 0.30% on the daily notional value of each OTC swap transaction.
• **NYMEX**: Receives licensing fees from UNG and certain Related Public Funds.
• **Regulatory Bodies (SEC, CFTC, NFA, NYSE Arca)**: Oversee UNG's operations and filings. USCF and USO previously paid $2.5 million in civil monetary penalties to the SEC and CFTC.

Next Steps

• The plaintiff in the In re: United States Oil Fund, LP Securities Litigation has until November 26, 2025, to move to amend the complaint.
• USCF, USO, and other defendants intend to vigorously contest the claims in the In re: United States Oil Fund, LP Securities Litigation and In re United States Oil Fund, LP Derivative Litigation.
• UNG will continue to monitor its exposure to market and counterparty risk through financial, position, and credit exposure reporting controls and procedures.
• UNG will continue to publish monthly account statements for its shareholders, furnished to the SEC on Form 8-K and posted on its website.

Key Dates

Recommendation

While UNG experienced a significant decline in NAV and a quarterly loss, this was primarily driven by a decrease in natural gas prices, which is inherent to its investment objective of tracking natural gas futures. The fund demonstrated excellent tracking of its benchmark and even outperformed it by 1.43% for the nine-month period, largely due to interest income exceeding expenses. Management anticipates this trend to continue. The legal proceedings mentioned are either dismissed or being vigorously contested, with no immediate adverse impact indicated. The natural gas market remains volatile but has potential upside from increasing LNG demand and AI data centers. Given the fund's effective tracking and potential for positive net yield, a "hold" recommendation is appropriate for investors seeking exposure to natural gas, acknowledging the inherent commodity price volatility.

Keywords

Natural Gas Futures, Commodity Pool, SEC Filing, 10-Q, UNG, NYSE Arca, Natural Gas Prices, Futures Contracts, OTC Swaps, Investment Fund, Financial Performance, Market Risk, Contango, Backwardation, USCF, Commodity Trading, Energy Market